Microsoft Corp's revenue growth slowed more than expected in the last quarter of last year, but the revenue growth of the core business smart cloud did not slow as much as the market expected. the relative resilience of the cloud business helped offset the impact of a stronger dollar and a decline in PC-related business, supporting the company's total profit still better than expected.

After US stock market trading on Tuesday, 24th US Eastern time, Microsoft Corp announced that in the second quarter of fiscal year 2023, that is, the fourth quarter of the Gregorian calendar, the company's sales revenue was slightly lower than expected, and its growth slowed significantly compared with the previous quarter, while the decline in earnings per share (EPS) and profit slowed significantly compared with the previous quarter.

• Operating income in the fourth quarter was $52.7 billion, up 2% from the same period last year.Analysts expect $52.93 billionIt grew by 10.6% in the third quarter compared with the same period last year, but if the effects of exchange rate fluctuations are not taken into account, the fixed exchange rate is used.Revenue increased by 7% year-on-year, higher than the market's expected growth rate of 6.59%。

• Adjusted diluted EPS for non-GAAP caliber was $2.32 in the fourth quarter.Down 6% from a year earlier, analysts expect $2.30It fell by about 13.3% in the third quarter from a year earlier.

• Adjusted operating profit in the fourth quarter was $21.6 billion, down 3 per cent from a year earlier and up 6.3 per cent in the third quarter from a year earlier.

• Adjusted net profit in the fourth quarter was $17.4 billion, down 7% from a year earlier, and about 14.4% in the third quarter.

After the announcement of the results, Microsoft Corp shares, which closed down more than 0.2 per cent, rose nearly 5 per cent in after-hours trading, but then fell. Some analysts commented that market sentiment has deteriorated significantly in the past three months, and the fourth-quarter results may be a relief for Microsoft Corp stocks, as the market expects a worse decline than the results show.

Cloud and Office businesses are both better than expected, while PC-related revenue has plummeted by double digits.

In terms of business, the revenue of Microsoft Corp's two core businesses in the cloud era-intelligent cloud with Azure as the core and productivity and business process business dominated by Office-exceeded market expectations in the fourth quarter, only the business revenue related to Windows and Surface personal computer (PC) fell lower than expected, and the PC business declined by double digits.

• Revenue from the "smart cloud" business, which includes Azure, GitHub, server products, enterprises and cloud services, was $21.5 billion, up 18% year-on-year, while analysts expect $21.43 billion and 20% year-on-year growth in the third quarterAt fixed exchange rates, revenue grew by 24% in the fourth quarter.Revenue from Azure and other cloud services increased by 31% in the fourth quarter and 35% in the third quarter, while revenue from server products and cloud services increased by 20% in the fourth quarter and 22% in the third quarter.

• Revenue from Productivity and Business processes, which includes Office products, LinkedIn, Dynamics products and cloud services for business and individual consumers, was $17 billion, up 7% year-on-year, while analysts expected $16.81 billion and 9% year-on-year growth in the third quarter. Revenue from Office commercial products and cloud services increased by 7% in the fourth quarter, 7% in the third quarter, 11% in the fourth quarter and 11% in the third quarter. Revenue from Office consumer products and cloud services fell 2% in the fourth quarter, 7% in the third quarter, 10% in the fourth quarter, 17% in the third quarter, 13% in the fourth quarter, 15% in the third quarter, 21% in the fourth quarter and 24% in the third quarter.

• Revenue from the "more personal computing" business, which includes Windows, search, game console Xbox and Surface computers, was $14.2 billion, down 19% from a year earlier, of which revenue from Windows OEM (original equipment vendors) fell 39% in the fourth quarter and 15% in the third quarter compared with the same period last year. Search and news advertising revenue, excluding traffic acquisition costs, grew by 10% in the fourth quarter, 16% in the third quarter, down 39% in the fourth quarter and up 2% in the third quarter.

The growth rate of cloud revenue such as Azure was the slowest in history, but reversed the trend that was lower than expected for two consecutive quarters, and the exchange rate effect reduced the growth rate by 7 percentage points.

Wall Street has noticed that nearly half of Microsoft Corp's revenue comes from markets outside the United States, and the strengthening exchange rate of the US dollar has greatly affected Microsoft Corp's performance in the last three quarters. In his third-quarter results, Microsoft Corp predicted that exchange rate factors would reduce full-year sales growth by 5 per cent. The smart cloud business, which is of particular concern to the market, grew at a year-on-year growth rate of no more than 20% in the third and fourth quarters, which is significantly slower than the quarterly high growth rate of more than 45% since 2020, mainly affected by the strength of the US dollar.

The following financial report screenshot shows the year-on-year growth of Microsoft Corp's major businesses under the unadjusted GAAP caliber, as well as the year-on-year growth at a fixed exchange rate, excluding the impact of the US dollar exchange rate. It can be found that Dynamics 365 business was the most affected, with growth falling by 8 percentage points and cloud business revenue growth by 7 percentage points.

The growth rate of Azure income in the fourth quarter was the slowest in Microsoft Corp's history. Financial statements show that if the exchange rate fluctuations of the strong US dollar are not taken into account, it is calculated at a fixed exchange rate.Revenue from cloud services such as Azure grew 38% year-on-year in the fourth quarter, while the market is expected to grow 37%Reversing the previous two consecutive quarters of slower-than-market growth.

Media commented that although the growth was not as strong as before, Microsoft Corp's cloud business showed resilience in the fourth quarter, thanks to the relatively stable demand for cloud computing services. Even though sales of Windows software and PC have plummeted due to the shrinking market, the durability of Azure has helped Microsoft Corp achieve performance growth.

Amy Hood, chief financial officer of Microsoft Corp, also mentioned the strong performance of the cloud business when releasing the results, saying that "while continuing to invest to drive growth, the company is focused on operational excellence." Microsoft Corp's cloud revenue in the fourth quarter was US $27.1 billion, an increase of 22% over the same period last year and 29% at a fixed exchange rate, as our commercial products continue to create value for our customers. "

Invest heavily in AI, optimistic about the prospect of Microsoft Corp cloud combining with AI

The results come just after Microsoft Corp announced on Monday that he had invested billions more in OpenAI, the laboratory that developed ChatGPT, and made a further bet on AI through the largest investment in the history of artificial intelligence (AI).

Microsoft Corp Chairman and CEO Satya Nadella said at the time that Microsoft Corp was rapidly promoting the commercialization of OpenAI tools and planned to integrate artificial intelligence tools including ChatGPT and DALL-E into all Microsoft Corp's products. Microsoft Corp said that the next stage will focus on bringing all kinds of tools to market.

In the announcement of the results released on Tuesday, Nadella said, "as Microsoft Corp Cloud transforms the world's most advanced artificial intelligence model into a new computing platform, the next important computing wave is being born. We are committed to helping customers use our platforms and tools to do more with fewer resources today and to innovate for the future in the new era of artificial intelligence. "

Edit / lydia